Pearson: Welcome to the Market Plus segment here on Market to Market. Glad you've joined us at our Web site. Be sure to tell your friends and neighbors, love to have them join us here too. Doug Jackson and Walt Hackney with us, two of our senior analysts, they have a great grip on the livestock and grain markets. Doug, you were talking about the soybean market and as we look at the soybean market today everybody is worried about the dry weather here. But we're kind of taking our eye off the global picture. What is happening around the world particularly in the leading soybean producing country of Brazil?
Jackson: Well, that's true, Mark. The market has still got to deal with the factor that we have a bi-hemispheric supply situation in beans and we learned a very good lesson in the 2003-2004 shortage where even as early as September we knew we were going to run out of beans in the United States. But we hardly got to eight dollar beans by November that year and, of course, it took us until the following March when we really drew inventories down in the United States to get to that $10.50 level as we were trying to discount the geographically specific shortage in the northern hemisphere. Of course, the market now knows that we're going to be projecting with normal yields, even if acreage is down slightly in Brazil next year a rebound of over ten maybe twelve million tons of beans in Brazil next year. So, you see, even if we had a 36 or 37 bushel yield disaster in the United States we'd still have 10 or 15 million more tons of beans in the western hemisphere next spring. So, the market is trying to put that all together while at the same time trying to discount, again, a possibility of a sharp North American shortage. We would never really ever be running out of beans. You'd have 115 million tons of beans every six months regardless. So, how do you put that all together? Well, of course, the shortage in the United States still took us to $10 beans in 2004 but those inventories will be even larger in Brazil this coming year if they don't have an unprecedented third drought in a row. But, of course, some would suggest we have new unprecedented ocean flow patterns in the Atlantic that could set them up for a bizarre third year of a drought but we'll have to wait and see. Right now the market is going to assume good weather and an average yield which would sharply rebound production there. Interestingly, even at these prices, Mark with the Real, the Brazilian currency exploding higher, fertilizer prices higher, spraying costs higher, the Brazilian farmer thinks he's barely breaking even and after years of expanded acreage they're actually talking about contracting acres. Long-term, Mark, with eight million more tons of demand a year amazingly we need to expand South American acres six million acres per year every year to keep world supply/demand in balance. We have no more ability to increase acres in North America and anything that keeps acreage from expanding at that rate in South America longer term pushes us into a tight situation. So, a lot of upside potential and perhaps not as much downside potential in beans long-term as people think even if the South American crop is big next spring.
Pearson: Alright, ooh boy, a lot happening in that world. Walter, this cow market has been awfully good for a long time. Are we starting to keep some females back now and starting to build herds? Are we starting to get some relief from the droughts out there in the West?
Hackney: Just this week there has been some very interesting information available. For one thing, Mark, I guess I had overlooked the fact that we've imported over six percent more feeder cattle out of Mexico this year than we have in the past. I thought that was interesting. We have killed five or six percent fewer females in the federal inspected slaughter. That would be heifer cattle, not particularly cold cows. We're probably going to retain 3-4% more heifer cattle this fall off of the calf crop for herd replacement than we have in the past. So, those are all evidences of one, we had a short supply of available feeders so we brought in the Mexican cattle. We're also killing fewer female cattle in the federal inspected slaughter. That would be females 30 months and younger. We're going to keep three or four percent more calves, heifer calves this fall. All that is creating an additional percentage of growth in our national beef cow herd. Two years, 2007 we potentially are in fact going to be looking at a greater supply of available feeder cattle than we've had probably for three years. So, the potential here in this herd increase is to increase our beef supply, isn't it. The point there being I don't know what that combined with an open door policy for imports of live cattle is going to create here for us in our long-term markets. We probably are going to have to get very used to a market more in the lower eighty cent bracket than we were formally here in the last two or three years.
Pearson: Okay, but again it makes sense that we're finally seeing that herd expansion is finally starting to occur here in North America. So, that is the word. And, of course, that is something that you want to plug into your operations longer term and also what is happening as far as the expansion of soybean acres in South America. Doug, Walt, very insightful. Thank you so much, as usual. For all of us here on Market to Market, I'm Mark Pearson. Have a great week.